What Is Debt Consolidation?

Most of us have seen the myriad of debt consolidation advertising campaigns on TV. There is plenty of competition in the debt consolidation market because unfortunately, many individuals are struggling financially and these companies provide much needed financial relief. Home loans, car loans, credit cards; individuals can obtain loans from a vast variety of lenders for pretty much anything these days. The issue is that all these loans are hard to manage and if you fall behind in your monthly repayments, you can find yourself in a lot of trouble.

The notion behind debt consolidation is that you can bring all of your existing debts together and consolidate them into one, easy to manage loan that is easier and gives you a far clearer picture of your financial future. For many individuals, there are a range of benefits in consolidating your debts, and this article will examine debt consolidation thoroughly and the advantages they provide to give you a better understanding if debt consolidation is a good choice for your financial situation.

The Basics

Debt consolidation allows you to pay off all your current debts with a new loan that typically has different (and in most cases more attractive) interest rates and terms. There are a couple of reasons why individuals use debt consolidation services.

High-Interest Rates

All loans have differing interest rates and terms and conditions, however, credit cards likely have the highest interest rates of all loans. Though credit card companies commonly have a no interest period of approximately 1 or 2 months, the interest rates after this time can soar up to 25% or higher. If you end up in a situation where you’re paying 25% interest on your credit card loans, it’s likely that your debt will cultivate much faster than you’re able to pay it off. Usually, debt consolidation can provide lower interest rates and better terms, which can save you plenty of money in the long-run.

Too much confusion with multiple loans.

When you have plenty of debts with varying interest rates and minimum repayments that are due at different times, there’s no doubt that it can be very difficult to manage and can become confusing. This increases the risk of missing a repayment which can give you a bad credit report. Debt consolidation substantially helps in this situation by merging all of your debts into one which is far easier to take care of and gives you a clearer picture of when you’ll be debt free.

High Monthly Repayments

When people are confronting multiple debts, it’s very difficult to manage your cash flow as a result of the high minimum repayments required for each debt. In addition to this, different debts have different repayment dates and this can cause individuals to struggle just to make ends meet. If you miss a repayment because you simply don’t have the money, your interest rates are likely to be increased, you can get a bad credit rating, and your financial circumstances can go south surprisingly quickly. Debt consolidation loans provide one repayment every month, and you can negotiate your monthly repayment amounts according to the length of time you want your loan to be.

With this being said, if you’re interested in consolidating your debts, it’s vital that you conduct plenty of research to find the best debt consolidation interest rates and terms. You’ll come across a wide range of debt consolidation companies, some are good, some are bad, and some are entirely predatory. To start with, you’ll want to choose a debt consolidation company that has lower interest rates and fees than all of your current debts. You’ll also need to review the terms and conditions thoroughly. Certain consolidation loans can be secured against your home or other assets, and you may be required to pay extra fees for instance application fees, legal fees, stamp duty and valuation. The reality is, there is a great deal of homework that needs to be done before you can figure out if debt consolidation is the right option for you.

As you can easily see, there are a range of benefits related to debt consolidation for people that are struggling financially. Lower interest rates and fees, lower monthly repayments, and less confusion with multiple debts can save you a great deal of money in the long-term, and it’s most likely better for your psychological wellbeing too. This article isn’t intended to encourage you to consolidate your debts, as it all depends upon your financial situation. Because of the complexity and the many variables to consider, it’s highly recommended that you seek professional advice so you can at least get an idea of what option is best for you if you’re experiencing financial difficulty. In some situations, filing for bankruptcy is a better solution, so before you make any decisions about your financial future, speak with Bankruptcy Experts Port Macquarie on 1300 795 575 or visit their website for additional information: www.bankruptcyexpertsportmacquarie.com.au

 

By | 2017-11-15T02:51:25+00:00 June 21st, 2017|Bankrupt, blog|0 Comments

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